* Dollar higher across the board, trade still thin
* Sterling falls half a percent
* Little reaction to slip in Japan CPI
(Updates prices, adds comment on sterling fall)
By Patrick Graham
LONDON, Dec 27 The dollar inched higher against
the yen and a handful of other major currencies in
holiday-thinned trade on Tuesday, with sterling by far the
biggest faller as concerns over next year's Brexit negotiations
continued to weigh heavily.
Going into the final week of 2017, the trend remains towards
a stronger U.S. currency, although a 1 percent retreat for the
greenback before Christmas suggested any attack on 120 yen and
parity with the euro may have to wait until January.
Those bankers at their desks in continental Europe, with
London on holiday, said they would be watching chiefly for any
sign of a year-end squeeze in the cost for banks of borrowing
dollars relative to other currencies.
Such costs - called the cross currency basis - have been
rising and could support the dollar over the next few days. It
gained 0.25 percent to 117.40 yen and 0.1 percent to
$1.0441 per euro by 1250 GMT.
"The rise in the euro dollar basis is an argument for dollar
strength. Plus you have the fundamental factors going into the
beginning of next year that point (that way)," said Lutz
Karpowitz, a strategist with Commerzbank in London.
"But so far it really has been quiet."
With Hong Kong and Sydney closed, there was little reaction
in Asian time to Japanese inflation data, which saw core
consumer prices mark the ninth straight month of annual declines
The yen has fallen by almost a fifth in value since the
start of November and some in Tokyo argue that a slowing of the
rise in U.S. Treasury yields and concerns over President-elect
Donald Trump's relationship with China may support the Japanese
currency going forward.
"Trump's policies are understood to be conducive to
inflation and a stronger currency. But a higher dollar would be
a significant setback to the U.S. economy seemingly in the
ending stages of an expansion," wrote Makoto Noji, senior
strategist at SMBC Nikko Securities.
"Therefore, the Trump administration and the Federal Reserve
would have to stick to a cautious monetary policy stance to
prevent the dollar from appreciating excessively. We thus expect
a very gradual downtrend for dollar/yen."
The pound fell almost half a percent to $1.2243, trading
within a few ticks of an 8-week low hit before Christmas.
"The pound has come under added pressure into the end of the
year," analysts from the LMAX currency exchange said in a note
"Diverging economic outlooks and monetary policy divergence
should keep a lid on sterling rallies, while the threat of a
hard Brexit and looming invocation of Article 50 could expose
the UK currency to additional downside."
(Additional reporting by Shinichi Saoshiro in TOKYO; editing by
John Stonestreet and Raissa Kasolowsky)